Student loan defaults reach a record high

A.J. Lacefield spends more on his student loan payments than he does on his rent and car payments combined.

The 27-year-old New Albany resident graduated from Heidelberg University in 2014 about $55,000 in debt. He’s been chipping away at his payments, but it hasn’t been easy.

“Sometimes I have to choose between paying off college or having a life,” said Lacefield, who now works at a software marketing firm. “It becomes difficult.”

Despite the difficulty, Lacefield hasn’t defaulted on his loans.

But a record 8.5 million federal student borrowers have, as of June of this year, according to data released recently by the U.S. Department of Education.

Nationally, the three-year student loan default rate rose for the first time in four years, to 11.5 percent.

That percentage — the 2014 cohort default rate — measures the share of federal student loan borrowers who began repayment in the 2014 fiscal year and defaulted in fiscal years 2014, 2015 or 2016.

In Ohio, nearly 29,000 borrowers defaulted out of nearly 212,000 who entered repayment in 2014, a rate of 13.6 percent. That's the 10th-worst rate among the fifty states, District of Columbia and U.S. territories.

Ohio Christian University in Circleville notched the highest 2014 default rate among central Ohio colleges and universities at 23.4 percent.

Ohio introduced a new funding formula in 2014 to reward schools based on student success, not just enrollment. State funding is now tied to schools’ course and degree completions.

Often, students who default don’t owe large amounts of money, said Debbie Cochrane, vice president of the Institute for College Access and Success, a nonprofit group dedicated to making college more available and affordable. Instead, those who default are typically students who didn’t complete their degrees. They might not have accrued as much debt, but they also didn't get the degree or training often necessary to land higher-paying jobs, Cochrane said.

When they default, it can be disastrous.

“Students who default face severe consequences,” Cochrane said. “Defaulted students will see their credit ruined.”

Institutions that have default rates at 30 percent or higher for three years in a row can lose eligibility for federal aid.

It can be difficult to pinpoint why an institution’s rate might be higher than average, Cochrane said. It could be a sign that students aren’t completing degrees, or even if they are, aren’t landing decent-paying jobs. Students and families should consider schools’ default rates when making decisions about college, she said.

“When you see a school with high default rates, you see something major is going wrong at that school,” she said.

Students at for-profit schools continue to account for a disproportionate share of student loan defaults, according to the Institute for College Access and Success. My Computer Career, a computer training school in Westerville, had the highest default rate of any central Ohio for-profit program with 21.1 percent. Other local for-profits, Hondros College in Westerville and Bradford School in Columbus, had lower rates of11.4 percent and 8.6 percent, respectively.

The U.S. Department of Education put new regulations in place last year as it fielded claims from students who said they were defrauded by the now-shuttered ITT Technical Institute and Corinthian Colleges. Those rules allowed students to have their loans erased if they were defrauded by their college with assurances that graduates would be able to earn enough money to repay student loan debt.

President Donald J. Trump’s administration has announced that it will begin rewriting those rules later this year. In the meantime, tens of thousands of claims from students who said they were defrauded by for-profit colleges remain unapproved by the Education department.

“Pulling back on these rules will have horrible results for students’ debt outcomes,” Cochrane said. “We’re going to see more students default because of the actions of this administration.”

Information from The Associated Press was used in this story.

jsmola@dispatch.com

@jennsmola

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